Pulsed eddy current (PEC) thermography (a.k.a. induction thermography) has been successfully applied to detect defects (corrosion, cracks, impact, and delamination) in metal alloy and carbon fiber reinforced plastic. During these applications, the defect detection mechanism is mainly investigated based on the eddy current interaction with defect. In this paper, defect characterisation for wall thinning defect and inner defect in steel is investigated based on heat diffusion. The paper presents the PEC thermography testing, which integrates the reflection mode and transmission mode by means of configuring two cameras on both sides of sample. The defect characterisation methods under transmission mode and reflection mode are investigated and compared through 1D analytical analysis, 3D numerical studies, and experimental studies. The suitable detection mode for wall thinning and inner defects quantification is concluded.